Arizona State Tax
Does Arizona tax military retirement pay?
No. Not since the 2021 tax year.Arizona lets its residents subtract all of their military retired or retainer pay on their state return. Only the state where you are a resident can tax that pay, so a home across a state line can change the answer.
This page shows who it covers, how a surviving spouse is treated, and what changes if you live across the line in California.
Start Here
Who it covers
If you are an Arizona resident, you can subtract all of your military retired or retainer pay from your Arizona income. This started with the 2021 tax year.
Married and filing together? If you both get this pay, each of you can subtract all of yours.
A surviving spouse: Arizona's Department of Revenue says the surviving spouse of a military veteran who gets payments from the uniformed services can subtract all of them.
You claim it on Arizona's resident return, Form 140. Its instructions show the line.
Sources: Arizona Revised Statutes, 43-1022 (paragraph 26). Arizona Department of Revenue, 2025 Form 140 instructions. Arizona Department of Revenue, Military Tax Filing. All retrieved 14 October 2026.
What The Line Changes
Arizona or California
Federal law says a state cannot tax the retirement income of someone who is not its resident, and that includes military retired pay. So the state where you are a resident decides, not where you served or where you retired from.
Once you retire, the federal law that lets a service member keep a home state while stationed somewhere else no longer covers you. California's tax agency says a retiree's residence is then decided by state law.
You live in Arizona
Arizona residentNot taxed
You subtract all of it, from the 2021 tax year on.
Each of you subtracts all of yours
On a joint return, each spouse subtracts their own full amount.
Not taxed, says Arizona's tax agency
Arizona's Department of Revenue says a surviving spouse subtracts all payments from the uniformed services.
No end year in the law
Arizona's law sets no end year for it.
You live in California
California residentTaxed, with up to $20,000 left out
Only if your federal adjusted gross income is $125,000 or less, or $250,000 or less on a joint return.
Up to $20,000 on the joint return
Not $20,000 each.
Up to $20,000 of Survivor Benefit Plan payments left out
If your federal adjusted gross income is $125,000 or less, or $250,000 or less, depending on how you file.
Tax years 2025 through 2029
That is the window California's law sets.
Every other state sets its own rule. If you are looking across a different state line, ask that state's tax agency how it treats military retired pay.
Sources: 4 U.S. Code 114. Arizona Revised Statutes, 43-1022. Arizona Department of Revenue, 2025 Form 140 instructions. California Franchise Tax Board, Military. California Franchise Tax Board, Publication 1032 (2025). DFAS, State Income Tax Withholding. All retrieved 14 October 2026.
When You Move
Check your state withholding
DFAS, the Defense Finance and Accounting Service, can take state income tax out of your retired pay for one state at a time.
You can start, stop or change it in myPay, or with DD Form 2866. If you move, check which state, if any, your retired pay is set to.
DFAS says it cannot take state tax out for annuitants. DFAS calls people who get Survivor Benefit Plan payments "SBP annuitants".
Sources: DFAS, How to Start, Stop or Change State Income Tax Withholding from Your Military Retired Pay. DFAS, Taxes. Both retrieved 14 October 2026.
Before You Buy
What to ask before you choose a side
Ask these before you sign, so the tax is part of the plan.
- Which state will I live in, and what does that state's law say makes me a resident?
- Does that state tax military retired pay? If it has an income limit, will I be under it?
- If my spouse would get Survivor Benefit Plan payments, how does that state treat them?
- Is my state withholding in myPay set to the state I will live in?
- What about my other income, like a job or another pension? This page covers only military retired pay.
This page is not legal or tax advice. Arizona's Department of Revenue and California's Franchise Tax Board decide how your return is treated. Ask a tax professional about your own case.
A page can explain the tax rule.An agent who works near Marine Corps Air Station (MCAS) Yuma and Yuma Proving Ground can walk a specific home with you.
Ashley Layton is a Mission Ready Operator who helps military, government and federal families compare off-base homes near MCAS Yuma and Yuma Proving Ground.
Last reviewed October 2026 · Maintained by My Military HQ
Common Questions
Questions retirees ask about Arizona tax
Does Arizona tax military retirement pay?
No, for the 2021 tax year and later. Arizona residents can subtract all of their retired or retainer pay from the uniformed services of the United States on Arizona's resident return, Form 140. If both spouses on a joint return get this pay, each can subtract all of theirs.
Does Arizona tax a surviving spouse's military payments?
Arizona's Department of Revenue says the surviving spouse of a military veteran who gets payments from the uniformed services of the United States can subtract all of those payments on an Arizona return.
Does Arizona tax active duty military pay?
No. Arizona residents can subtract pay for active duty service on Form 140. Arizona's Department of Revenue says reserve and National Guard members can subtract all of their reserve or Guard pay. A service member stationed in Arizona who is not an Arizona resident does not pay Arizona income tax on military pay.
If I move to Arizona, can the state I retired from tax my military retirement pay?
Not once you are no longer its resident. Federal law says a state cannot tax the retirement income of someone who is not its resident, and that includes military retired pay. Each state uses its own law to decide who its residents are. If you are an Arizona resident, Arizona's rule applies, and Arizona does not tax it.
Does California tax military retirement pay?
Yes, for California residents, unlike Arizona. For tax years 2025 through 2029, California lets a resident leave out up to $20,000 of military retired pay, if federal adjusted gross income is $125,000 or less, or $250,000 or less on a joint return or when filing as a surviving spouse. On a joint return the limit is $20,000 for the couple. Survivor Benefit Plan payments have their own $20,000 limit.
How do I change state tax withholding on my military retirement pay?
Use myPay, or send DD Form 2866, says DFAS, the Defense Finance and Accounting Service. DFAS takes out tax for one state at a time. If you move to Arizona, check which state, if any, your retired pay is set to.
Sources
Where every fact came from
Everything on this page comes from Arizona law, California law, federal law, or the agencies that apply them. Where they do not say something, we left it out.
- Arizona's rule for military retired pay. Arizona Revised Statutes, 43-1022, paragraph 26, Arizona Legislature. Retrieved 14 October 2026.
- Married couples, surviving spouses, Form 140, and service members stationed in Arizona. 2025 Arizona Form 140 instructions, line 29b, "Do You Have to File?" and the military section, Arizona Department of Revenue. Retrieved 14 October 2026.
- Active duty, reserve and National Guard pay. Military Tax Filing, Arizona Department of Revenue. Retrieved 14 October 2026.
- No state can tax a nonresident's retirement income. 4 U.S. Code 114, U.S. Government Publishing Office. Retrieved 14 October 2026.
- California's rule and its exclusion. Military and Publication 1032, 2025 Tax Information for Military Personnel, California Franchise Tax Board. Both retrieved 14 October 2026.
- State withholding from retired pay, and annuitants. State Income Tax Withholding and Taxes, Defense Finance and Accounting Service. Both retrieved 14 October 2026.
What we left out on purpose. We give no tax rates, because they change, and we do not say how much you would save, because that depends on your whole return. We cover only military retired pay, not how Arizona taxes your other income. We cover only Arizona and California, because each other state sets its own rule. And we leave out Arizona's smaller limits before the 2021 tax year, and the forms for a year you move in or out.
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